‘We’re Not Pirates, We’re Just Providing Shipping Services to Pirates’

The Justice Department unsealed an indictment in Virginia charging seven people and two companies with online piracy through their affiliation with MegaUpload.com. According to prosecutors, the “Mega Conspiracy” — nice branding, DOJ — netted more than $175 million in criminal proceeds.

The department said the charges represented one of the “largest criminal copyright cases ever brought by the United States.” We’ve pawed through the 72-page indictment for some highlights.

The alleged conspiracy was fairly simple: MegaUpload.com and affiliated sites used an “Uploader Rewards” Program, through which it paid premium subscribers cash in return for uploading copyrighted movies, television shows, musical, electronic books, photos, video games and other computer software.

The pirated works were stored on servers in Toronto, Los Angeles and Ashburn, Va., according to the indictment. (MegaUpload has paid more than $65 million for computer leasing, hosting, bandwidth and support services, the indictment says.)

When a user uploaded something, MegaUpload generated a link. Users couldn’t search for links to copyrighted movies or the like on MegaUpload sites such as Megavideo.com, Megaclick.com or Megaporn.com. Instead, the links to infringing works were hosted by third-party sites.

Lawyers for MegaUpload did not immediately comment. It was unclear if any of the individual suspects charged in the case had yet retained criminal defense lawyers

MegaUpload generated more than $25 million in online advertising revenues. (The rest of Mega’s profits came from subscriptions.) Originally, Mega contracted with advertising companies, including Google AdSense. But that didn’t last. According to the indictment,

On or about May 17, 2007, a representative from Google AdSense, an Internet advertising company, sent an e-mail to DOTCOM entitled “Google AdSense Account Status.” In the e-mail, the representative stated that “[d]uring our most recent review of your site [Megaupload.com,]” Google AdSense specialists found “numerous pages” with links to, among other things, “copyrighted content,” and therefore Google AdSense “will no longer be able to work with you.”

Afterward, MegaUpload created its own advertising site to set up the ad campaigns, cutting out contractors entirely, according to the indictment.

The indictment cites several emails intercepted by law enforcement that show Mega executives joking about their potential liability. For instance,

On or about July 9, 2008, VAN DER KOLK sent an e-mail to a third party, entitled “funny chat-log.”

In the e-mail, VAN DER KOLK copied the text of a previous online conversation between himself and ORTMANN, in which VAN DER KOLK had stated, “we have a funny business . . . modern days pirates :)”

At one point, in 2006, Mega was copying videos from YouTube, according to the indictment.

“Do we have a server available to continue downloading of the Youtube’s vids? … Kim just mentioned again that this has really priority,” Van Der Kolk said in an April 2006 email to Ortmann, according to the indictment.

Van Der Kolk followed up with another email that day: “Hope [Youtube.com is] not implementing a fraud detection system now… * praying *”.

Internet providers gain a safe harbor under U.S. law from civil copyright infringement suits if they meet certain criteria, including being able to take down copyrighted material as soon as it’s discovered.

MegaUpload created a so-called “abuse tool” with several major U.S. copyright holders to allow them to remove infringing material. They could simply enter specific links to pirated content, and MegaUpload’s systems would then remove the underlying file or block access to it.

But according to the indictment, MegaUpload tricked the copyright holders. If a user tried to upload a movie that was already in the company’s servers, it wouldn’t be duplicated on servers but a new link would be created nevertheless. So any one file could have dozens (or more) links, meaning a copyright holder would have to track them all down in order to actually have the one underlying file erased from the servers.

According to the indictment, MegaUpload executives distributed a number of infringing works personally, including a song by rapper 50 Cent, recordings by trance producer Armin van Buuren and episodes of the Sopranos.

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